Wasco secured a contract to supply prefabricated buildings worth RM161.9m from Schneider Electric France for a project in Africa. The project is expected to be completed within 17 months. This is another notable contract win after it secured 2 significant projects worth about RM350m, namely Shell RosmariMarjoram and Shell Crux Pipeline which brings its outstanding orderbook to an all-time high of RM3.9bn as at 2QFY23. On a separate note, Wasco’s transformation plan remains on track after it divested a non-core asset worth RM40m, with more to come by the end of the year. The divestment will enable Wasco to re-channel its capital and resources to its core businesses. We retain our Neutral recommendation and unchanged TP of RM1.00.

• The contract. The scope of work of the contract involves engineering, procurement, and construction of prefabricated buildings. The contract is estimated to be completed within 17 months with earnings contributions up to 1QFY25.

• Significant progress from key projects. Wasco’s orderbook stood at all-time high of RM3.9bn as at 2QFY23. However, we believe it will be reduced in 3QFY23 as it recognizes progress billings from key projects. Notably, fabrication of Yinson’s FPSO Agogo topside modules has reached 90% completion in 3QFY23 from 60% completion in 2QFY23. It also completed delivering a Gas Compression facility with an E-house for TOTAL’s Dunga Field Development in Kazakhstan and Statpipe New Landfall Project in Norway.

• Divestments in the pipeline. Wasco is expected to record one-off net gain of RM31.8m in 1QFY24F after it disposed a freehold plots of land in Klang worth RM40m on 12th October 2023. The disposal of non-core assets will enable the Group to re-channel its capital and resources to its core businesses (Energy and Bioenergy). We expect the Group will close another asset disposal by the end of this year.

Source: PublicInvest Research - 25 Oct 2023